Agenda - Council - 02/12/1985 - Laserfiche WebLink

Home

I I i I I I I I I I I I I I I I I / Housing activity in Minnesota is up 8.3 percent through the first 3 qua~ers of this year versus the same period one year ago. The western half of the Twin Cities area shows the most population and household growth. The growth extends from northern Dakota County through western Hennepin and southern Anoka Counties. There has been strong growth throughout the entire metropolitan area but less intense growth around the eastern part. The Metropolitan Council's preliminary population and household estimates also show that the population has decreased somewhat in a crescent through the "inner ring" westen'~'~' i r :i suburbs and the central cities. '.~:i :.!!!;ii The estimates show a gain in the area of 71,000 people from April 1980 to April 1984, bringing iilii! iiii! the total population to 2,056,820--a 3.6 percent increase. The unemployment rate for Minnesota dropped to 5.4 percent in September. It was 6.4 percent one year ago. Employment in our state increased 1.2 percent, or by 22,300 jobs, between August and September. Builders strongly favor a reduced federal deficit. According to Harvard professor, Martin Feldstein, the deficit will be $250 billion by 1990. Says Feldstein, "Cutting the deficit will drop interest rates. We can have a balanced budget by 1990 by increasing taxes 8 percent combined with spending cuts of 8 percent, saving $40 billion on debt service for every 1 percent the interest rate falls... But if no action is taken, the National debt will increase so dramatically in the next five years that it will require 15 percent across the board tax increases just to finance the interest costs." Interest rates continue to drift downward. On December 19% several major banks lowered their prime rate to 10.~4 percent. The prime is likely to be cut again as a result of the FED's reduction in its discount rate to 8 percent. The Veterans Administration reduced its ceiling rate to 12.5 percent for interest on basic home loans. Reasons given for the drop in rates were slower economic growth and a slight easing of the pressure on bank reserves by the FED. The biggest monthly increase in the sale of ne,'single-family detached homes since 1980 occurred in September, when sales iumped 21.9 percent to an annual rate of 679,000. The median sales price was $80,000. Dr. Michael Sumichrast, Chief Economist for the National Association of HOme Builders predicts a continuing dependence on two incomes for purchasing a home, and interest rates that will remain in the two digit range. The government will continue to use a large share of the capital available, and housing will have to compete with the government for funds.